Markets Live chat transcript for the chat ending at 12:17 on 1 Mar 2010. Participants in this chat were: Neil Hume, FT Bryce Elder
NH
hola
NH
and welcome to Markets Live
NH
on a very, very busy Monday morning
NH
the Pru has announced the details of its $35bn deal to buy the Asian operations of AIG
NH
and its share have returned from suspension
NH
results from HSBC are out
NH
and its share have fallen sharply
NH
as has the Great British Krona
NH
following this weekend’s poll news – the Tories just two points ahead of Labour
NH
making a hung parliament more likely
NH
Bryce is here
BE
morning
11:04AM
NH
right
NH
is sterling still below $1.50?
BE
Hang on
BE
Ouch. $1.4980
BE
And 90.76 against the euro
NH
double ouch
NH
first time the GBK
NH
has traded below $1.50 since May 2009
BE
The Great British Rupia
NH
sterling price of gold hits record high above £738
NH
now that’s a record high
NH
apparently
BE
As in, the sterling price of bullion is a record.
NH
yes
NH
actually
NH
how much will the Pru deal be weighing on sterling?
BE
Hm
BE
Not sure that’s going to be a market mover at the moment.
NH
no
NH
but it will be
NH
now, the damage to sterling
NH
seems to have been caused by this opinion polls in the Sunday Times?
BE
Two point lead to Shinyface, you mean?
NH
yes
NH
surprising that
NH
Perhpas the Pier Morgan interview
NH
worked after all
NH
(Taxloss – Gillian(
BE
Perhaps. Everyone looks better standing next to Piers.
NH
11:08AM
NH
OKay
NH
we had better had a look at the Pru
NH
now, in spite of this not being a reverse takeover
NH
Pru shares were suspended at the open
NH
as the details of the deal
NH
and its results were put together
NH
but they have reopended
NH
and…
BE
Down
BE
Down 74p at 528.5p at the moment.
BE
Which, I reckon, isn’t all that bad.
NH
No
NH
given the size of the cash call
NH
which has been priced yet
NH
this is a transformational deal for the Pru
NH
it’s no cliche to say that
BE
Yes. For once it isn’t.
NH
but there will be dilution
NH
because if the deal
BE
And the integration risks must be huge, obviously.
NH
yep
NH
and the US govt will end up a shareholder in the Pru
11:10AM
NH
Okay
NH
let’s have a look at the breakdown of the deal
NH
record breaking cash call
NH
bigger than Lloyds
NH
£13.9bn vs £13.5bn
BE
Reuters says it’ll be at the end of April, citing 
BE
And, of course, this isn’t to rescue someone from a bungled acquisition
NH
No
NH
this is to make one
NH
an acquisition that is
NH
Now, for those of you who didn’t wade through the statement
NH
here’s the details
NH
via Olivetree
NH
- Paying $35.3bn total: $25bn Cash / $5.5bn New Shares / $3bn Mandatory Convertibles / $2bn Prefs.
- Cash Component of $25bn is split: $20bn via an underwritten rights issue / $5bn senior debt.
- Remaining New Shares / Mandatory Convertibles / Prefs all issued to AIG Directly
- Cash Component of $25bn is split: $20bn via an underwritten rights issue / $5bn senior debt.
- Remaining New Shares / Mandatory Convertibles / Prefs all issued to AIG Directly
NH
Transaction Details
- Rights issue to run during May.
- Transaction multiple is 1.7x EV, which is top end of expectations. This weekend’s press was intimating 1.5-1.7x.
- Transaction is expected to close in Q3 2010, with the rights issue scheduled to run thru May.
- Prudential will establish a primary dual-listing in HK (similar to HSBC).
- Conference Call @ 12pm London Time today: http://www.prudential.co.uk/ prudential-plc/ Dial-in (Pin: 2486527): +44 208 817 9301 / 0800 634 5205 (UK Freephone).
- Rights issue to run during May.
- Transaction multiple is 1.7x EV, which is top end of expectations. This weekend’s press was intimating 1.5-1.7x.
- Transaction is expected to close in Q3 2010, with the rights issue scheduled to run thru May.
- Prudential will establish a primary dual-listing in HK (similar to HSBC).
- Conference Call @ 12pm London Time today: http://www.prudential.co.uk/ prudential-plc/ Dial-in (Pin: 2486527): +44 208 817 9301 / 0800 634 5205 (UK Freephone).
NH
So,
NH
as you can see from the above
NH
the key question shareholders are going to have is price
BE
Yup
NH
this looks toppy
NH
but they will doubtless argue
NH
that it is a once in a life time opportunity
BE
Said as much in the statement in fact.
NH
Right
NH
some comment on the deal
NH
I think
BE
Sure
BE
Merrill first
BE
Dilution vs re-rating
This is a full, but fair price, in our view. We estimate the headline EPS multiple is
19x (2010E) or 16x after taking into account cost synergies. This looks high to us
but is consistent with four things: 1. the Asian peer group, which trade in the
range 18-30x; 2. press speculation regarding the IPO pricing range of AIA; 3. our
own fair multiple for Prudential’s Asian business; and 4. the recent multiples
proposed by a European insurers for an Asian minorities buy in.
Prudential closed on Friday at 600p, which equates to 12.6x 2010E earnings,
11.4x 2011E. So clearly with the acquisition multiples above where the stock is
trading there would be dilution to Prudential’s earnings. We put this at 10% for
2011E and 8% for 2012E. However, Asia would double in significance to account
for 65-70% of EBIT and our fair value. So there should be a re-rating of the
multiple attached to the company. We put this at more than 2 PE points, which
should more than offset the dilution.
This is a full, but fair price, in our view. We estimate the headline EPS multiple is
19x (2010E) or 16x after taking into account cost synergies. This looks high to us
but is consistent with four things: 1. the Asian peer group, which trade in the
range 18-30x; 2. press speculation regarding the IPO pricing range of AIA; 3. our
own fair multiple for Prudential’s Asian business; and 4. the recent multiples
proposed by a European insurers for an Asian minorities buy in.
Prudential closed on Friday at 600p, which equates to 12.6x 2010E earnings,
11.4x 2011E. So clearly with the acquisition multiples above where the stock is
trading there would be dilution to Prudential’s earnings. We put this at 10% for
2011E and 8% for 2012E. However, Asia would double in significance to account
for 65-70% of EBIT and our fair value. So there should be a re-rating of the
multiple attached to the company. We put this at more than 2 PE points, which
should more than offset the dilution.
BE
The strategic rationale is sound
AIA is close match to Pru’s Asian business in terms of geographical footprint and
products sold. This would create a monster in Asia, which is unrivalled with
market shares ranging from 20-50% and a clear #1 position. Although the new
business writing capacity of the businesses is similar, AIA is a much bigger
business in terms of the back book of business – AuM and EV are 2.5-3x Pru Asia
and the earnings power is around 4x.
AIA is close match to Pru’s Asian business in terms of geographical footprint and
products sold. This would create a monster in Asia, which is unrivalled with
market shares ranging from 20-50% and a clear #1 position. Although the new
business writing capacity of the businesses is similar, AIA is a much bigger
business in terms of the back book of business – AuM and EV are 2.5-3x Pru Asia
and the earnings power is around 4x.
BE
Buy into weakness
So pulling this together, how do we play this? We think this is a good potential
deal for the company, we think the numbers do stack up and we would back the
management on execution. However, it is a big deal that involves a lot of
financing and this together with the headline dilution means the likely initial
direction could be down. We would use any deal related weakness as a buying
opportunity.
So pulling this together, how do we play this? We think this is a good potential
deal for the company, we think the numbers do stack up and we would back the
management on execution. However, it is a big deal that involves a lot of
financing and this together with the headline dilution means the likely initial
direction could be down. We would use any deal related weakness as a buying
opportunity.
The ultimate share price reaction however should reflect whether Pru is over or
underpaying for the business it is reported to be buying. It is our view that this is
moderate in either direction and that Prudential’s shares remain fundamentally
undervalued. It is quite inconceivable that the joint businesses will trade close to
the current Pru multiples (11-12x earnings), in our view. Buying in at these levels should ultimately prove highly rewarding for long term investors.
NH
a monster in Asia eh?
BE
Godzilla.
BE
There’s also an epic KBW note, which I’ll slice a few pars from.
NH
ok
BE
Given that a combination of AIA and Prudential’s Asian operations would dominate the agency distribution channels – we believe door-to-door selling is the best way to
tap the Asian “cash under the bed” savings stock – in the faster growing Asian regions, we believe that they would have a competitive advantage. They would also have a dominant position in the higher margin risk product areas here. In figure 1 below, given its acute sensitivity to assumed future growth rates, we calculate a rather wide range of $11-28bn for a standalone valuation. We also estimate in figure 2 that the present value of costs savings would be around $4-4.5bn. Taken together, we believe that a value-creating deal could be justified up to $30bn, but we would prefer a price <$25mn if value enhancement is to be demonstrated, given the risk of some attrition among agents post deal. On a standalone basis, we have an Outperform recommendation as we believe the stock offers value on most metrics when medium-term growth is considered.
tap the Asian “cash under the bed” savings stock – in the faster growing Asian regions, we believe that they would have a competitive advantage. They would also have a dominant position in the higher margin risk product areas here. In figure 1 below, given its acute sensitivity to assumed future growth rates, we calculate a rather wide range of $11-28bn for a standalone valuation. We also estimate in figure 2 that the present value of costs savings would be around $4-4.5bn. Taken together, we believe that a value-creating deal could be justified up to $30bn, but we would prefer a price <$25mn if value enhancement is to be demonstrated, given the risk of some attrition among agents post deal. On a standalone basis, we have an Outperform recommendation as we believe the stock offers value on most metrics when medium-term growth is considered.
BE
Growth stock. We believe the group is a genuine growth stock – it has unique competitive advantage in US VA, it is well positioned for the Western baby boomer bubbles maturing, it is one of two companies with large-scale agency distribution throughout Asia, and its large UK with-profit fund estate provides a unique product advantage in certain Asian markets – with strong top-line and dividend growth as catalysts. Commentators have viewed Solvency 2 as a significant risk for the Prudential, but we believe that the overwhelming evidence is in the opposite direction, in our view. The 9 March, 2010, results presentation is the next key date.
BE
Standalone valuation for AIA $11-28bn. In Figure 1 below, we have taken the FY09 net earnings, with normalised investment income and stripping out one-off items, as a base in our valuation. We have then applied a Dividend Discount Model to determine the valuation of AIA. The resultant multiples range from 8x to 19x, depending on what future growth rate is assumed and for what duration of cash flows are discounted. We, however, believe that a multiple of 15-20x in the centre of this range is more appropriate. The details of assumptions used to determine cost of equity (18%) and payout ratio (50%) are shown in the figure. Our conclusions are consistent with multiples seen for higher growth (25-30x for Ping An and China Life) and for Asian companies focused on more mature markets (around 15x) – see Reuters article, 19 February, 2010.
BE
Deal would be accretive. Prudential currently has a 10E IFRS multiple of 19x and, in our calculations in Figure 1 below, we have used multiplies in the 10-19x range, implying that an acquisition price under $28bn would be accretive on a standalone basis. If the cost savings/synergy potential is included, we believe that a price under $30mn, broadly speaking, would be accretive. These comments ignore differences between IFRS and the US Gaap accounting used by AIA at this point. It is not clear whether the deal would be accretive on an embedded value basis as AIA has not disclosed these type of numbers.
Deal risks exist. Given that competitors would like to poach AIA and/or Prudential agents, one must assume that there will be some attribution here in a combined venture. In addition, recently AIA management has been paying retention bonuses and promising agents IPO shares, which could cause issues if removed post deal. The fact that Prudential management consists of many ex-AIA people would allow them to be able to allow for risk in the price negotiations. In terms of integration risk, both companies have large unit-linked and risk books, with this similarity helping to reduce some of the risks. There could also be some attrition in the bancassurance deals that the combined group has, but this is a second order consideration compared to the dominant agency distribution channel.
BE
The largest player in a “sweet spot”. Broadly speaking, AIA and Prudential plc have $60bn and $30bn of assets under management in Asian, respectively. They have new business sales (APE) of $1.2bn and $1bn, respectively. Combined, they would have top three market shares in nearly all markets in the region except Japan and Taiwan, where they would, by choice it appears, have low representation. The presence in the Philippines would depend on whether PhilamLife is included (currently we assume not). In China, they would be, by far, the biggest non-local player, with the AIA leg rather 100% uniquely owned. The joint operations would be focused on agency distribution, but would have bancassurance distribution as well – Prudential has significant relationships with Standard Chartered, CITIC and ICICI, and AIA has 130 bancassurance deals.
NH
any more
NH
or is that enough?
BE
That’s only an extract of KBW, by the way. Usual place for more.
NH
So, it looks expensive
NH
but I guess shareholders will back it
NH
the other question I have
NH
is will anyone else jump in?
NH
I know
NH
no one can match the synergies of the pru
BE
Interesting question that.
NH
but if you want to grab a share of the Asian market
NH
this really is it
NH
there won’t be another chance
NH
I guess Axa have other things on their plate at the moment
NH
with that deal down under
NH
but what about another European insurer?
BE
Well … does anyone else have the balance sheet strength (or investor confidence therein) to make a move? I can’t think of many.
NH
not sure
NH
and that’s where the synergies help the pru
BE
Indeed.
11:19AM
NH
Also worth noting
NH
the Pru has numbers out
NH
and our man on the call
NH
paul davies
NH
says they aren’t very good
NH
so that wil be weighing on the price as well
NH
connected with all this
NH
we had a statement out of Resolution today
NH
saying that they are not in talks with buy the Pru’s UK business
NH
and the Pru says it wants to keep this division
NH
but for how long
NH
they are already going for a secondary listing in the UK
NH
how long
NH
before the Pru moves lock stock and barrel to HK
BE
Resolution Limited – Statement regarding press speculation
Resolution Limited notes the recent press speculation regarding Prudential
plc’s potential acquisition of AIA and a possible subsequent disposal of its
UK life assurance operations to Resolution.
Resolution confirms that it is not in discussions with Prudential regarding
the acquisition of its UK life assurance operations.
NH
hmmm
NH
does that mean they are working on something else
NH
why rush out a statement so quicky?
NH
one of the weekend papers said that RSL
NH
has been working on a break up bid for Aviva
NH
which was hatched in November
NH
will that be resurrected?
BE
Well, we’ve been banging on about that theory for some time.
NH
all felt a bit stale
NH
but in light of today’s news
NH
I don’t know
Resolution Ld (WI (RSL:LSE): Last: 72.50, up 0.25 (+0.35%), High: 72.95, Low: 71.85, Volume: 1.27m
11:23AM
NH
But of course
NH
if RSL
NH
was planning a deal for the Aviva
NH
how would it raise the finance now?
NH
after all the Pru is coming with a massive cash call
BE
Yeah – that’s going to be a massive drain on cash, much as the Lloyds one was last year.
NH
yep
NH
and we are already seeing that
NH
in the financials this morning
NH
anything large and liquid being banged out
Aviva (AV:LSE): Last: 373.90, down 16.4 (-4.20%), High: 394.30, Low: 373.30, Volume: 8.76m
Lloyds Banking Group (LLOY:LSE): Last: 50.08, down 2.42 (-4.61%), High: 53.43, Low: 49.68, Volume: 113.58m
Royal Bank of Scotland Group (RBS:LSE): Last: 36.30, down 1.37 (-3.64%), High: 38.19, Low: 36.21, Volume: 36.37m
Legal and General Group (LGEN:LSE): Last: 74.20, down 2.95 (-3.82%), High: 77.50, Low: 74.00, Volume: 17.99m
Barclays PLC (BARC:LSE): Last: 307.50, down 5 (-1.60%), High: 319.65, Low: 306.35, Volume: 20.60m
NH
hmmm
NH
quite heavy selling then, across the board
BE
Yup – and rather isolated selling at that.
NH
this Pru cash call
NH
does not bode well for anyone else
NH
hoping to come to the market
NH
and on the Pru rights issue
NH
the CEO
NH
is saying that a 40% discount look likely
NH
and this about right
NH
a lot of the cash calls last year
NH
were at a tighter discount
NH
can’t see that happening this time
NH
some more flashes
NH
RTRS-PRUDENTIAL CEO SAYS UK BUSINESS REMAINS KEY TO GROUP
10:58 01Mar10 RTRS-UK’S PRUDENTIAL CEO SAYS KEY INVESTORS ARE SUPPORTIVE OF DEAL
10:59 01Mar10 RTRS-UK’S PRUDENTIAL CEO SAYS WOULD EXPECT ASIAN INTEREST IN RIGHTS ISSUE
11:01 01Mar10 RTRS-UK’S PRUDENTIAL CEO CONFIRMS UK GENERATES CASH AND CAPITAL FOR GROUP, “SITS COMFORTABLY WITHIN OUR PORTFOLIO”
11:03 01Mar10 RTRS-UK’S PRUDENTIAL CEO COMFORTABLE WITH HOLDING ON TO UK BUSINESS “FOR FORESEEABLE FUTURE”
11:05 01Mar10 RTRS-UK’S PRU CEO SAYS CURRENT ASIA BOSS BARRY STOWE WILL PLAY “LEADING ROLE”, HAS NOT MADE DECISION ON TOP ASIA JOB YET
11:16 01Mar10 RTRS-UK’S PRU CEO SAYS AIG WILL HAVE STAKE OF AROUND 11 PCT IN NEW PRUDENTIAL
11:18 01Mar10 RTRS-UK’S PRU CEO SAYS AIG WILL BE AN INVESTOR IN PRU FOR “MEDIUM TERM”
11:24 01Mar10 RTRS-UK’S PRU CEO SAYS DISCOUNT OF 40 PCT FOR RIGHTS ISSUE IS “REASONABLE ASSUMPTION TO MAKE”
10:58 01Mar10 RTRS-UK’S PRUDENTIAL
10:59 01Mar10 RTRS-UK’S PRUDENTIAL
11:01 01Mar10 RTRS-UK’S PRUDENTIAL
11:03 01Mar10 RTRS-UK’S PRUDENTIAL
11:05 01Mar10 RTRS-UK’S PRU CEO SAYS CURRENT ASIA BOSS BARRY STOWE WILL PLAY “LEADING ROLE”, HAS NOT MADE DECISION ON TOP ASIA JOB YET
11:16 01Mar10 RTRS-UK’S PRU CEO SAYS AIG WILL HAVE STAKE OF AROUND 11 PCT IN NEW PRUDENTIAL
11:18 01Mar10 RTRS-UK’S PRU CEO SAYS AIG WILL BE AN INVESTOR IN PRU FOR “MEDIUM TERM”
11:24 01Mar10 RTRS-UK’S PRU CEO SAYS DISCOUNT OF 40 PCT FOR RIGHTS ISSUE IS “REASONABLE ASSUMPTION TO MAKE”
BE
UK “remains key”? That’s interesting.
NH
er yes
NH
In what way does it remain key
NH
80% of the business will be in Asia
BE
Hm. Fair question.
NH
actually I wonder what the underwritting fees on this will be
BE
Here’s KBW again with an observation about the UK / HK connection.
BE
we struggle to see them being sold for less than embedded value, which makes the economic difficult to stack up for Resolution. Importantly, the Prudential UK connection is important for their brand in Asian and, because HK is a branch of the UK with-profit fund, they can use the large c£7bn inherited estate to finance new business strain on UK guaranteed products. The latter is a unique competitive advantage. Currently, Prudential UK is the cash cow of the group, but if AIA is acquired, then this would be a less important consideration.
NH
hmmm
NH
you have to think
NH
it will eventually go
NH
another reason for RSL
NH
to keep their powder dry and wait on the sidelines
BE
I guess.
BE
But investors are getting rather twitchy about all that dry powder ….
Resolution Ld (WI (RSL:LSE): Last: 72.50, up 0.25 (+0.35%), High: 72.95, Low: 71.85, Volume: 1.28m
NH
as the share price shows
NH
big discount to the float price now
BE
And Cowdery’s options certainly seem to be narrowing every day.
NH
Okay
NH
bored with insurance now
NH
let’s get back to the market
11:30AM
NH
Sterling has fallen further
NH
Sterling extended losses to fall two percent against the dollar on Monday.
The pound fell as low as $1.4943, its lowest since early May 2009.
It was on track for its biggest one-day fall since March 2009.
The pound fell as low as $1.4943
It was on track for its biggest one-day fall since March 2009.
NH
which is not good news
NH
if for example
NH
you were looking to leave these shores and move overseas
NH
to somewhere like
NH
ummmmmm
NH
Australia perhaps
BE
Well, quite.
NH
bad timing
BE
Unfortunate.
11:31AM
NH
Right
NH
let’s just have a little look
NH
at the wider market
NH
FTSE 100
NH
started very brightly
NH
up 60 points
NH
but that has been reduced to an advance
NH
of just 10.5 points
NH
as the financials
NH
have been taken apart
NH
Right some of the ROTR
NH
asking about management changes here at the FT
NH
following today’s
NH
rather excellent
NH
stonking
NH
etc
NH
figures from Pearson
Pearson plc is the parent company of the Financial Times, publisher of FT Alphaville.
Pearson (PSON:LSE): Last: 931.00, up 19 (+2.08%), High: 931.50, Low: 913.50, Volume: 1.34m
NH
and here they are
NH
I am delighted to announce that Gillian Tett has been appointed as the new US managing editor, based in New York. Gillian’s award-winning coverage of the global financial crisis has drawn acclaim around the world. Having led the markets team from London, and with a wealth of global experience, she is ideally placed to lead the next phase of the FT’s editorial development in the US. She will play an important ambassadorial role in the region and strengthen our growing influence in the North American market. Gillian will move full-time to New York on September 1, but will be a regular presence in the New York newsroom up to that date.
NH
Chrystia Freeland will be leaving the FT to take up a role at Thomson Reuters. Chrystia has been a driving force behind the FT’s success in the US for the past four years, and has contributed to the FT’s global profile in many other senior roles in London and Moscow. I wish her every success with her future endeavours.
NH
I am also delighted to announce that Lisa MacLeod will replace Dan Bogler as managing editor. Lisa has played a key role in the development of the integrated news room and is currently engaged in important work to upgrade our Methode editorial system. For that reason,she will assume her new job on April 15. Jo Rollo will be acting managing editor until that date and will continue to work with Lisa to manage the transition.
NH
actually Bryce
NH
what’s the view on the Pearson numbers
NH
I saw that we are a big beneficiary of sterling weakness
NH
which, of course,
NH
would in no way
NH
influence our editorial output here on Alpha
BE
Nope – we won’t go kicking the Great British Guarini just to talk our corporate book.
NH
but the numbers
NH
were in line
BE
Yup
NH
(Dinker – chief pot washer)
BE
Here’s Lorna Tibian at Numis to explain
NH
(Lawnmover – yes)
BE
Pearson has reported a good set of preliminary results with PBT/EPS of £761m/65.4p slightly ahead of NSe £750m/64.1p. Total revenues and operating profits both grew +2% on an underlying basis. By division trading was as expected. US College, International Eduction and IDC held up relatively well and US Schools, FT Advertising and Penguin had a tougher year, although we were encouraged to see the trends began to ease in Q409. Guidance is for underlying profit growth in FY10 with US Education winning share and benefiting from Fed funds and new adoptions, International Education continuing to grow and FT Group enjoying good subscriptions renewals but a volatile advertising environment. In 2009 we upgraded forecasts throughout the year and, in line with consensus, we conservatively forecast a broadly flat 2010 although a higher base will move FY10 PBT/EPS from £750m/64p to £760m/65p. We see scope for further upgrades as we move through 2010, offset by the potential for a slightly dilutive sale of IDC. Pearson is our pick of the more defensive names, although we continue to prefer stocks with more cyclical exposure and scope for rerating.
NH
So, the FT made a profit
NH
in one of the worst advertising downturns in…..
BE
Of course it did. Why would it not?
BE
Here’s the bullet points.
BE
2009 results: Normalised PBT/EPS of £761m/65.4p was slightly ahead of NSe £750m/64.1p; consensus was 63.4p.
Revenues: Group underlying revenues were up +2%. By division on an underlying basis US Education was up +5%, International +4%, Professional -1%, FT Publishing -12%, IDC +2% and Penguin -2%.
EBITA: Group underlying EBITA was +2%. By division US Education was up +13%, International +14%, Professional +8%, FT Publishing -42%, IDC +2% and Penguin -19%.
DPS: The dividend was raised +5% to 35.5p, ahead of NSe 35.0p; giving a 4% yield.
Balance sheet: Net debt ended the year at -£1,092m (NSe -£1,141m).
Forecasts: From a higher FY09 base we are raising our FY10 PBT/EPS from £750m/64.1p to £760m/65.0p. Our FY11 forecasts, which reflect a rebound in Pearson’s more cyclical revenues, move from £835m/71.9p to £850m/73.2p.
Recommendation: Pearson is our prefered defensive play in the sector, and as in FY09 we see scope for incremental upgrades as we move through the year. We retain our Add recommendation with a 1046p t/p (was 1019p) but see more upside in stocks with higher cyclical exposure and scope for both upgrades and rerating.
Revenues: Group underlying revenues were up +2%. By division on an underlying basis US Education was up +5%, International +4%, Professional -1%, FT Publishing -12%, IDC +2% and Penguin -2%.
EBITA: Group underlying EBITA was +2%. By division US Education was up +13%, International +14%, Professional +8%, FT Publishing -42%, IDC +2% and Penguin -19%.
DPS: The dividend was raised +5% to 35.5p, ahead of NSe 35.0p; giving a 4% yield.
Balance sheet: Net debt ended the year at -£1,092m (NSe -£1,141m).
Forecasts: From a higher FY09 base we are raising our FY10 PBT/EPS from £750m/64.1p to £760m/65.0p. Our FY11 forecasts, which reflect a rebound in Pearson’s more cyclical revenues, move from £835m/71.9p to £850m/73.2p.
Recommendation: Pearson is our prefered defensive play in the sector, and as in FY09 we see scope for incremental upgrades as we move through the year. We retain our Add recommendation with a 1046p t/p (was 1019p) but see more upside in stocks with higher cyclical exposure and scope for both upgrades and rerating.
BE
And with that, let’s push on.
11:37AM
NH
Right
NH
back to sterling for one moment
NH
note from barcap has just landed
NH
asks whether the GBK
NH
is now undervalued
BE
Really?
BE
Give us a look.
NH
Nonetheless, we think the analysis is
useful and draw the following conclusions:
useful and draw the following conclusions:
NH
PPP is a useful model of the real exchange rate between economies with roughly the same
level of development.
level of development.
NH
GBP/USD has tended to move a long way in response to major changes of policy. This has
been particularly associated with the exchange rate regime itself – the UK has had a history
of fixing the exchange rate but then allowing inflation differentials (sometimes associated
with wars) to lead to competitiveness problems. There have only been two real episodes
where GBP/USD became significantly misvalued, and one of those was the period prior to
the crisis.
been particularly associated with the exchange rate regime itself – the UK has had a history
of fixing the exchange rate but then allowing inflation differentials (sometimes associated
with wars) to lead to competitiveness problems. There have only been two real episodes
where GBP/USD became significantly misvalued, and one of those was the period prior to
the crisis.
NH
That has two consequences: first, the overvaluation of GBP prior to the crisis was
associated with (other) bubbles in the UK economy, from which the UK is still recovering
associated with (other) bubbles in the UK economy, from which the UK is still recovering
NH
Second, and perhaps more important, there is little evidence that GBP is undervalued on a
longer-term horizon against the USD, despite having fallen a long way.
longer-term horizon against the USD, despite having fallen a long way.
NH
need to have a look at that i nmore detail
NH
the note will apear in the usual place later today
BE
Good good.
BE
Update: the Great British Dobra now buys $1.4874
NH
good
NH
the Great British Peseta
BE
The Great British Dong.
NH
wow
NH
sterling has dropped half a percent in a minute
NH
what’s going on
BE
This is beginning to look a bit like a crisis.
NH
it is
NH
and not very good news
NH
if you are about to move to Australia
NH
for example
BE
Yeah. That must really hurt. Hypothetically.
NH
any idea
NH
what’s causing it
NH
any eco data out?
BE
There is
BE
Mortgage approvals were a bit weak, but off a very low base so it’s hard to read much from that
NH
euro 91.5p against sterling now
NH
BE
And UK manufacturing popped the lights out, thanks to the Great British etc.
BE
Here’s HSBC on the latter theme
BE
The headline manufacturing PMI was unchanged in February at 56.6. This is the highest level in fifteen years.
Within this the export component increased further to 60.4, as weaker sterling continues to boost prospects for the
manufacturing sector.
Within this the export component increased further to 60.4, as weaker sterling continues to boost prospects for the
manufacturing sector.
BE
The rest of the breakdown was similarly solid. Output is at 59.8, new orders at 60.3, and employment is broadly stable at 50.3
(Chart 1). Weaker sterling is clearly boosting prospects for output in the manufacturing sector but the downside to weaker
sterling is also evident with the upward pressure on costs. The balance on input prices rose to 65.3 and this is partly being
passed through to output prices with that balance rising to 54.3.
The data on mortgage approvals and consumer credit were also released this morning. 48.2k mortgages were approved in
January a significant dip on the 58.2k seen in December. However, the severe weather conditions are likely to have played a
significant role in this decline. Net consumer credit, however, surprised to the upside rising £0.5bn on the month in January
after an upwardly revised £0.3bn in December.
(Chart 1). Weaker sterling is clearly boosting prospects for output in the manufacturing sector but the downside to weaker
sterling is also evident with the upward pressure on costs. The balance on input prices rose to 65.3 and this is partly being
passed through to output prices with that balance rising to 54.3.
The data on mortgage approvals and consumer credit were also released this morning. 48.2k mortgages were approved in
January a significant dip on the 58.2k seen in December. However, the severe weather conditions are likely to have played a
significant role in this decline. Net consumer credit, however, surprised to the upside rising £0.5bn on the month in January
after an upwardly revised £0.3bn in December.
BE
And M4, if anyone cares.
BE
The BoE also released its data on M4. Annual growth in total M4 rose 4.9%. The problem with the headline measure of
M4 is that movements have been dominated by portfolio shifts in the financial sector (see Chart 2). As such, M4 growth
strengthened during the crisis. The MPC were focusing on a measure which stripped out intermediate OFCs (other financial
corporations). This rose by 1.9% on a three month annualised basis, the first increase in five months. The M4 lending data
excluding intermediate OFCs increased to 4.7% on a three-month annualised basis (Chart 3). However, this measure can also
be distorted by portfolio flows and so in order to gauge lending to the real economy, it seems as though the MPC have turned
their attention towards the sectoral breakdown of M4 holdings by households and corporates (shown in Chart 2). On this basis,
household M4 remains broadly steady at 2.4% and private non-financial corporate loan growth has eased back slightly to 3.7%
but in contrast to 2008 and much of 2009, it is still growing on a monthly basis.
M4 is that movements have been dominated by portfolio shifts in the financial sector (see Chart 2). As such, M4 growth
strengthened during the crisis. The MPC were focusing on a measure which stripped out intermediate OFCs (other financial
corporations). This rose by 1.9% on a three month annualised basis, the first increase in five months. The M4 lending data
excluding intermediate OFCs increased to 4.7% on a three-month annualised basis (Chart 3). However, this measure can also
be distorted by portfolio flows and so in order to gauge lending to the real economy, it seems as though the MPC have turned
their attention towards the sectoral breakdown of M4 holdings by households and corporates (shown in Chart 2). On this basis,
household M4 remains broadly steady at 2.4% and private non-financial corporate loan growth has eased back slightly to 3.7%
but in contrast to 2008 and much of 2009, it is still growing on a monthly basis.
NH
actually, this fall in sterling is also bad news if you happened to be off to Japan
NH
say at the end of the week
NH
to work for say six months
NH
So
NH
all that eco data
NH
does not look to bad
BE
Nope.
NH
and the idea that the Pru
NH
is causing this fall in sterling
NH
been thinking about that
NH
and surely its nonsense
BE
Nope – not buying that.
NH
the cash call doesn’t start till May
NH
shareholders have to back
NH
and then the deal doesn’t close till Q3
NH
it can’t be that
NH
unless they are trying to hedge
NH
other bits and pieces
BE
Would “bits and pieces” be enough to move the dial? I doubt it.
NH
nah
NH
but the wires are now flashing the Pru as a reason
BE
Well there you go.
BE
Meh.
11:46AM
NH
Right
NH
let’s cut back to some stocks
NH
Pru now off 14%
NH
and what about HSBC
NH
results out
NH
and…
HSBC Hldgs (HSBA:LSE): Last: 683.08, down 36.52 (-5.08%), High: 736.60, Low: 679.30, Volume: 76.91m
BE
Miss
BE
Unexpected, quite ugly miss on the earnings line
NH
is this down to the insurance business
NH
losses doubled their?
NH
the compensation culture?
BE
Well, that’s one reading I guess.
NH
and there was a fair value reversal on debt
BE
$6.5bn negative, in fact
NH
I was also reading something
NH
from Robert Law at Nomura
NH
he says some of the main growth business in the far east
NH
put in disappointing performances
NH
The HSBC figures are light; we estimate approximately $1bn (5%) or so in the continuing operations. This shortfall appears to have been concentrated in Asia ex Hong Kong, which is a key part of the growth story and is disappointing, in our view. At the same time, HSBC Finance also reversed some quarters of stabilisation/improvement in Q4 and losses increased and delinquency also rose (allowing for accelerated write-offs). These factors have prompted an initial fall in the shares, which is understandable to us and also represents a potential negative read across to Standard Chartered. However, we would argue that the overall headline trends were not markedly worse than expectations and we remain positive of the group’s longer term strengths. However, valuation is 1.9x TBVPS and some 10.4x our estimate of normalised EPS and these do represent significant premiums over developed market banks. Regardless of longer term attractions, the valuations are vulnerable to a set of disappointing earnings.
BE
May as well chuck in some more comment, starting with Leigh Goodwin at Citi
BE
Initial reaction: Looks like a considerable miss, even allowing for larger-thanexpected
reversals of fair value gains on own debt. Looks to be light on revenues
and heavy on costs, with impairments in line. We think the reversal of the
previously improving quarterly impairment trend within the US Finance
Corporation is a particular disappointment, as well as NIM weakness.
Around 12% light at underlying PBT level. FY09 EPS came in at USD 34c versus
Citi 43.2c and company-supplied consensus 43.0c. PBT of USD7.1bn versus Citi
and consensus FY09e USD10.5bn. Note that included within this are Fair Value
on own debt gain reversals were USD-6.25bn, versus Citi USD-5.7bn and
consensus USD-4.7bn. Hence, underlying PBT excluding FV on own debt
gains/reversals was USD13.3bn versus Citi USD16.2bn (a miss of 18%) and
Consensus USD15.2bn (a miss of 12%).
reversals of fair value gains on own debt. Looks to be light on revenues
and heavy on costs, with impairments in line. We think the reversal of the
previously improving quarterly impairment trend within the US Finance
Corporation is a particular disappointment, as well as NIM weakness.
Around 12% light at underlying PBT level. FY09 EPS came in at USD 34c versus
Citi 43.2c and company-supplied consensus 43.0c. PBT of USD7.1bn versus Citi
and consensus FY09e USD10.5bn. Note that included within this are Fair Value
on own debt gain reversals were USD-6.25bn, versus Citi USD-5.7bn and
consensus USD-4.7bn. Hence, underlying PBT excluding FV on own debt
gains/reversals was USD13.3bn versus Citi USD16.2bn (a miss of 18%) and
Consensus USD15.2bn (a miss of 12%).
BE
By division, the main difference versus expectations was a larger-than-expected
loss in PFS at USD-2.1bn versus Citi and consensus USD-1.3bn. Commercial
Banking also light at USD4.3bn versus cons USD4.7bn and Citi USD4.9bn, as was
GBM USD10.5bn versus consensus USD11.4bn and Citi USD11.5bn.
Revenues light and NIM weak. FY09 group revenues were USD66.2bn versus Citi
FY09e USD68.5bn and consensus USD68.9bn. Even allowing for a heavier impact
of the reversal of FV gains on own debt than expected, this is light by around
USD1.2bn versus consensus and USD1.8bn versus our own expectations. NII fell
by 2% in 2H09 versus 1H09, with the Group NIM declining from 3.08% in 1H09
to 2.94% for FY09, implying 2H09 must have been around 2.8%.
But expenses rose more than expected in 2H09. FY09 expenses were USD34.4bn
versus Citi FY09e USD33.7bn and consensus USD33.6bn. The 2H09 expenses
were USD17.74bn versus 1H09 USD16.66bn, a rise of 6.5%, while total revenues
fell by 9.5% h-o-h.
loss in PFS at USD-2.1bn versus Citi and consensus USD-1.3bn. Commercial
Banking also light at USD4.3bn versus cons USD4.7bn and Citi USD4.9bn, as was
GBM USD10.5bn versus consensus USD11.4bn and Citi USD11.5bn.
Revenues light and NIM weak. FY09 group revenues were USD66.2bn versus Citi
FY09e USD68.5bn and consensus USD68.9bn. Even allowing for a heavier impact
of the reversal of FV gains on own debt than expected, this is light by around
USD1.2bn versus consensus and USD1.8bn versus our own expectations. NII fell
by 2% in 2H09 versus 1H09, with the Group NIM declining from 3.08% in 1H09
to 2.94% for FY09, implying 2H09 must have been around 2.8%.
But expenses rose more than expected in 2H09. FY09 expenses were USD34.4bn
versus Citi FY09e USD33.7bn and consensus USD33.6bn. The 2H09 expenses
were USD17.74bn versus 1H09 USD16.66bn, a rise of 6.5%, while total revenues
fell by 9.5% h-o-h.
NH
thanks
BE
Impairments broadly in line overall, but uptick in US Finance Corporation. Group
FY09 impairments were USD26.5bn versus Citi FY09e USD26.0bn and consensus
USD26.6bn. Within the HSBC Finance Corporation, the 4Q09 impairment charge
was USD3.2bn. This is a disappointing reversal of the trend of sequential
quarterly improvements in this area through 2009. The 4Q09 USD3.2bn follows
USD3.4bn in 2Q09 and USD3.0bn in 3Q09. In our view, many investors viewed
HSBC as a good ‘play’ on the improving US consumer credit theme, and while the
4Q09 rise is not very large in the scheme of things, it may cause investors to focus
again on the problems in the US Finance Corporation.
FY09 impairments were USD26.5bn versus Citi FY09e USD26.0bn and consensus
USD26.6bn. Within the HSBC Finance Corporation, the 4Q09 impairment charge
was USD3.2bn. This is a disappointing reversal of the trend of sequential
quarterly improvements in this area through 2009. The 4Q09 USD3.2bn follows
USD3.4bn in 2Q09 and USD3.0bn in 3Q09. In our view, many investors viewed
HSBC as a good ‘play’ on the improving US consumer credit theme, and while the
4Q09 rise is not very large in the scheme of things, it may cause investors to focus
again on the problems in the US Finance Corporation.
BE
Dividends lower than market expected. The FY09 DPS was 34.0c versus Citi FY09
34.0c and consensus 35.0c. The Interim Quarterly dividend for 1Q-3Q was 8.0c, so
10.0c declared for 4Q09.
Capital ratios improved, assisted by stronger GBP we believe. The FY09 core tier 1
capital ratio was 9.4% versus 9.0% at 3Q09, and our forecast for FY09e of 9.0%, so
this strengthened more than we expected in 4Q09. Note that the fair value of own
debt gains/reversals do not impact capital. However, FX movements (strengthening
GBP versus USD, we believe) added USD2.4bn to tier 1 capital in the year and
probably accounts for most of the difference versus our forecast.
34.0c and consensus 35.0c. The Interim Quarterly dividend for 1Q-3Q was 8.0c, so
10.0c declared for 4Q09.
Capital ratios improved, assisted by stronger GBP we believe. The FY09 core tier 1
capital ratio was 9.4% versus 9.0% at 3Q09, and our forecast for FY09e of 9.0%, so
this strengthened more than we expected in 4Q09. Note that the fair value of own
debt gains/reversals do not impact capital. However, FX movements (strengthening
GBP versus USD, we believe) added USD2.4bn to tier 1 capital in the year and
probably accounts for most of the difference versus our forecast.
NH
the HSBC results statements are always a nightmare
NH
the divisions all repoprt
NH
and then the PLC
NH
and that can go to 500 pages
NH
just so big
BE
Yup – second only to trying to make sense of GE
NH
a real nightmare
11:51AM
NH
OK
NH
back to the Pru/ AIA again
NH
sterling
NH
now what happens if
NH
and this is a big if
NH
the GBK collapses
NH
between now and the deal closing
BE
… it’ll end up costing the Pru a lot more cash.
NH
precisely and what do they do about?
NH
have a bigger cash call?
NH
hedge themselves
NH
I mean this could be a deal breaker
BE
The maths barely works on this already.
NH
if the GBK tanks
NH
hang on
NH
a broker has just sent me over some workings on this
NH
Prudential priced at 530 == Market cap 13.4 billion
Rights issue to raise 20 billion US dollars … at 1.50 that would equal 13.3 billion sterling
Rights issue to raise 20 billion US dollars … at 1.50 that would equal 13.3 billion sterling
NH
Rights issue doesn’t start till may and completes in June – (assume after the election)
Deal doesn’t actually complete till q3 ..
Deal doesn’t actually complete till q3 ..
NH
However what happens if sterling falls between now and the rights being announced , and falls further before the deal is completed
Are they hedged?
Are they hedged?
NH
Certainly the major question I have related to the hedging ….
Meeting due later…
Meeting due later…
What happens if Sterling goes from 1.50 to 1.35 by June
The cash consideration would rise from 13.3 billion to 14.8 billion sterling
NH
That’s not taking into consideration the 10 billion USD in Pru stock that will be paid .. (but assume that comes after the rights .. we would need to see the prospectus for that )
10 billion at 1.50 obviously is around 6.65 and that would clearly increase to 7.4 billion at 1.35
10 billion at 1.50 obviously is around 6.65 and that would clearly increase to 7.4 billion at 1.35
NH
There is a second leg to the sterling risk ..
Between completion of the rights and the deal completing which could be several months ..
Again an unanswered question .. and what happens to international shareholders who cant take up the rights issue…
Between completion of the rights and the deal completing which could be several months ..
Again an unanswered question .. and what happens to international shareholders who cant take up the rights issue…
If you are worried about sterling then there is plenty to think about here…
BE
That’s interesting stuff.
NH
it is a risk
NH
I wonder if the question has been asked at the conference call this morning
NH
or if they have hedged
BE
Hm. This is a really interesting theme. It’s not difficult to imagine a scenario where Pru shares risk entering a death spiral.
NH
yes
NH
tied to the GBK
NH
what a position to be in
NH
they should shift the primary listing to HK
NH
quick
BE
(Lemmy: Group 4 Securicor worked okay, didn’t it?)
11:56AM
NH
Right
NH
there has been some other stuff going on today
NH
the miners all up
NH
pretty much
Kazakhmys (KAZ:LSE): Last: 1,380, up 39 (+2.91%), High: 1,406, Low: 1,378, Volume: 1.54m
Fresnillo Plc (FRES:LSE): Last: 772.50, up 22 (+2.93%), High: 781.00, Low: 763.50, Volume: 217.85k
Xstrata Plc (XTA:LSE): Last: 1,050, up 19.5 (+1.89%), High: 1,078, Low: 1,039, Volume: 7.58m
NH
and also good results out of Tomkins
Tomkins (TOMK:LSE): Last: 199.60, up 7 (+3.63%), High: 202.50, Low: 198.40, Volume: 5.70m
BE
Haven’t had a look at those yet. Got any comment?
NH
nope
NH
been a little bit busy
NH
but Panmure
NH
have found the time to have a look
NH
Tomkins’ results are well ahead of expectations. It appears that it has
trimmed the low margin parts of its empire to good effect, and has managed
to deliver a very strong FCF result. We place our estimates and target price
under review.
trimmed the low margin parts of its empire to good effect, and has managed
to deliver a very strong FCF result. We place our estimates and target price
under review.
NH
Tomkins has exceeded expectations on many fronts (see table). Revenue was slightly
ahead, but AOP was significantly better than expectations at US$262m, versus our
US$218.5m. Ignoring pension items and taxing the result at 25%, it earned 19.1¢ versus
our 14.1¢, which used a tax charge of 28%
ahead, but AOP was significantly better than expectations at US$262m, versus our
US$218.5m. Ignoring pension items and taxing the result at 25%, it earned 19.1¢ versus
our 14.1¢, which used a tax charge of 28%
NH
The AOP surprise came from the Power Transmission division which managed to post
margins at 13.5% in H2 2009 versus 10.5% in H1 2009. During H2 2009 the key
segments (Industrial and Building) earned margins that we currently forecast for FY
2010E. This gives the potential for estimate revisions given the environment of
improved volumes and run-rate cost benefits.
margins at 13.5% in H2 2009 versus 10.5% in H1 2009. During H2 2009 the key
segments (Industrial and Building) earned margins that we currently forecast for FY
2010E. This gives the potential for estimate revisions given the environment of
improved volumes and run-rate cost benefits.
NH
Its net debt at US$207m was significantly ahead of expectations (US$400m+). This has
been achieved with a better working capital result at US$243m versus our US$108m.
Guidance for 2010E looks better than expected, with a 16% uplift for Automotive OE
in the US (flat in Europe), and an all important mid single digit uplift for Industrial OE.
Valuation. We value Tomkins at an EV to sales of 0.8x for 2011E, versus its five year
average of 0.74x. With better net debt and margin prospects there is room to revise this
upwards.
been achieved with a better working capital result at US$243m versus our US$108m.
Guidance for 2010E looks better than expected, with a 16% uplift for Automotive OE
in the US (flat in Europe), and an all important mid single digit uplift for Industrial OE.
Valuation. We value Tomkins at an EV to sales of 0.8x for 2011E, versus its five year
average of 0.74x. With better net debt and margin prospects there is room to revise this
upwards.
NH
So, Bryce
NH
is there anything else you want to look
BE
Um ….
BE
We’ve hit everything I’ve looked at so far this morning, so no.
BE
No small cap corner today, I guess.
NH
well
NH
was looking at Dominion Petroleum
NH
they have raised $50m
NH
and this is another new Tullow Oil
NH
exploring on the same rift
NH
to the North
BE
Uganda
NH
indeed
NH
but as BrokerManDan knows only too well
NH
no every well in Uganda is a gusher
BE
Incidentally, hasn’t Tower abandoned their dry well?
NH
Neptune Petroleum (Uganda) Limited (“Neptune”), the wholly-owned subsidiary of Tower Resources plc, has completed operations on the Avivi-1 exploration well in Uganda Licence EA5. The well was plugged and abandoned and the rig released at 6am on 27th February.
NH
The well, which was drilled to a total depth of 764 metres, did not encounter oil, despite persistent methane gas traces, and tested water from the target reservoir interval using a wireline fluid sampler. Electric logging confirmed the absence of oil and gas. Although the well failed to encounter hydrocarbons, valuable and encouraging information was gained, which, together with the information from Iti-1, will allow a much greater understanding of the Licence. Within the next few weeks, the Tower Board will consider whether it intends to apply to continue into the Third (and final) Exploration Period of two years. When that decision has been made, a more complete account of the programme to date will be given.
NH
Tower’s Chairman, Peter Kingston, commented: “A second dry hole in EA5 is disappointing. However, this is a very large Licence and the failure to encounter commercial oil or gas reserves with the first two wells does not necessarily diminish the License’s prospectivity. As soon as the analysis of the information we have gained has been completed, and a decision has been made regarding the Third Exploration Period, we will provide a fuller statement on the Avivi-1 well results.”
NH
that came out this morning
BE
“persistent methane gas traces”
BE
Nasty.
NH
have we checked BrokerManDan on this?
BE
He hasn’t published since Feb 25.
BE
It’s very disappointing.
NH
that is
NH
and it’s also really sad
NH
the RNS alert has been stopped
NH
for the record
NH
Tower Resource is down 16.3% at 1.1p
NH
and Dominion is flat at 5.5p
BE
Ouch. I’d assumed this’d already be in the Tower price.
NH
oh no
BE
the well was, after all, DRY
BE
What were investors expecting?
NH
when it was a 4.5p last week
NH
another Tullow
BE
Hm. True.
BE
A view assisted by ….
12:03PM
NH
Right
NH
back to the GBK
NH
and..
NH
the latest quote is
NH
1.4897
NH
which will be music to the ears of Vince Stanzione
NH
now, you might have missed his apology over the weekend
NH
for putting words in Jim Rogers’ mouth
NH
and here is the release
NH
which is will worth repeating
NH
London – Trader and investment coach Vince Stanzione, who is sharing a seminar platform in March with financier Jim Rogers and investment adviser Dr Marc Farber, has this morning issued a retraction of the press release issued yesterday which stated that Jim Rogers claimed the pound could collapse within weeks.
NH
In a statement approved today by Jim Rogers, Vince Stanzione says: “The quotes attributed to Jim Rogers yesterday – including the one that the pound could collapse within weeks – were issued by me prematurely, without the approval of Mr Rogers, who was travelling at the time and did not have knowledge of the press release before it went out. While Mr Rogers does note that the pound has had a downward adjustment, and that a severe double dip in the global economy is a strong likelihood, the idea that it might happen within weeks came from me, not Jim Rogers. It was based on my belief that the pound is vulnerable in the run-up to the UK general election.”
NH
Jim Rogers adds: “I did not see yesterday’s press release before it went out and do not believe that the pound’s collapse is imminent. I accept Vince Stanzione’s retraction and am pleased that he has taken responsibility for the press release.”
Stanzione continues: “I apologise to Jim Rogers, the media, our press agency and to anyone else who may have been affected by the statement. I believed I was reflecting Mr Rogers’ sentiments but I accept that I should have sought his final approval before issuing the release. I take full responsibility.”
NH
Jim Rogers says he is looking forward to speaking in London on the March 19, 2010, and sharing his views on currencies, commodities and the global markets: “I have always had a great time speaking at Vinces’s events. “
The press release has been withdrawn.
NH
actually
NH
we probably shouldn’t have put that up
NH
after all, it’s just giving Vince the oxygen of publicity
BE
Hm.
NH
for his massively expensive seminars
BE
Which look pointless and worthless, in my opinion.
BE
And are all based on freely available basic chartist rote, in my opinion.
BE
Which very rarely works, in my opinion.
NH
talking of which
NH
I wonder if this guy is attending
NH
Nick Beecroft, Senior FX Consultant at Saxo Bank, comments on Sterling’s collapse:
NH
This morning we have witnessed what can justifiably called the beginnings of Sterling’s collapse. So long as the markets could harbour some hope that the next government, in only 3 months time, would be a fiscally prudent, business-friendly Conservative one that would act swiftly to reduce the UK deficit and borrowing mountains, the pound was able to just about hold its own against the Euro, ( which is itself entering a possibly fatally damaging period), but today the damn burst and it could not even do that, let alone against the almighty dollar-as of now perceived as the ‘best, worst’ major safe haven currency. This weekend’s UK election polls-predicting a Labour Government, ruling over a ‘hung’ parliament, put paid to that dream.
NH
Expect a test of 1.40 within a month and, as the global landscape turns ever-more ugly on the back of deflation and sovereign debt concerns, a continuing flight to the US Dollar, taking Sterling down below 1.20 by the summer.
NH
so there you have it
NH
$1.20 by the summer
NH
gulp
BE
So – the Great British … er … what was that defunct US Civil War currency called? The Continental, wasn’t it?
BE
It was: http://en.wikipedia.org/wiki/Continental_(currency)
NH
more comment from the market on this
BE
Go on.
NH
GBP: HEARING GOT HIT BY ONE UK NAME …
NH
- GBP obviously gapped lower earlier – gapping almost 200 points in a matter of
minutes to trade at 1.4784 lows, which saw EUR-GBP push up to 0.9148 lows.
- A number of macro funds and momentum accounts have been active today and I’m
hearing of good model fund interest as U.S. accounts entered the market
following a large sell-order from a U.K. clearer.
- Support at the lows reportedly came from quality names, raising speculation
that some smoothing operations took place (central bank), which encouraged
short covering to 1.4890.
- However, any strength is expected to be sold in to as sentiment remains very
weak in London following large anticipated M&A flows and increased risk of
U.K. hung parliament at the next U.K. election due in the spring.
minutes to trade at 1.4784 lows, which saw EUR-GBP push up to 0.9148 lows.
- A number of macro funds and momentum accounts have been active today and I’m
hearing of good model fund interest as U.S. accounts entered the market
following a large sell-order from a U.K. clearer.
- Support at the lows reportedly came from quality names, raising speculation
that some smoothing operations took place (central bank), which encouraged
short covering to 1.4890.
- However, any strength is expected to be sold in to as sentiment remains very
weak in London following large anticipated M&A flows and increased risk of
U.K. hung parliament at the next U.K. election due in the spring.
BE
Yeah – there has been one name mentioned, including on the right.
BE
But we’ve no evidence of that, so we should probably wrap this up.
NH
(thanks JBS – can you mail me with a screen shot. will send to Assanka. neil.hume@ft.com)
Cracking little software shop who built FT Alphaville
BE
(JBS: although generally – we have issues with Chrome. There are simply too many builds and versions to keep track of.)
BE
(Firefox/Opera/Safari should all be fine.)
12:10PM
NH
Right
NH
are we done?
BE
Yep – I think we are.
BE
Nice relaxing start to the week.
NH
Just want to mention Taxloss’s ‘Sod off and don’t come back drinks’
NH
scheduled for Friday
NH
for those of you who want to come along
NH
at a venue to TBC
NH
and our man from the North will need somewhere to crash
NH
before that we
NH
have ‘sad to see you go and pls come back in six months’ drinks
NH
for Tracy
NH
who is off to Tokyo for six months
NH
and is currently staring at a graphic of the yen vs gbk
NH
annd weeping
BE
BE
Right – lunchtime wrap’s pending.
BE
Thanks for all your comments.
NH
yes
NH
thanks for logging on today
NH
we must go
NH
I am off to digest the excellent pearson results
NH
and have a bit of lunch
NH
(toolbox – tracy is off to Japan)
NH
and a market update to end with
NH
FTSE 100 is up 12 points at 5,367
NH
and in a a hard currency
NH
it is down around 2%
NH
and cable is $1.4881
BE
Ok – we really do have to end this now.
BE
Goodbye.
NH
cya
NH
and that’s why
NH
Tracy has been groaning
NH
at the GBP YEN graphic
NH
looks very ugly
NH
right
NH
that’s it
NH
see ya tomorrow
NH
when the sterling will be worth the same as zim dollar
NH
bye